From April 2005, employees can receive up to 50 a week of childcare, free of tax and National Insurance, where their employers either contract with an approved childcarer or provide vouchers for the purpose of paying an approved childcarer.
What is new?
Currently, where an employee receives childcare or childcare vouchers as a benefit-in-kind, a tax charge arises on the benefit, except in limited circumstances where the employer provides a nursery on the employer's premises, or one that is wholly or partially managed and financed by the employer. No employers' Class 1A National Insurance charge currently arises on the provision of childcare, and childcare vouchers are currently exempt from Class 1 National Insurance. But from April 2005 the first 50 a week of contracted childcare or vouchers will be tax-free and the National Insurance exemption will be aligned with this.
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